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Effect of Acquiring Roundup on Bayer Company

Paper Type: Free Assignment Study Level: University / Undergraduate
Wordcount: 884 words Published: 9th Oct 2020

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Bayer is the German pharmaceuticals and chemicals company with over 150-year history. It is Innovation Company that strives to make better life for its consumers providing an adequate food supply and responding to the challenges in healthcare environment. The worlds well known Bayer is having a huge problem since completing acquisition of Roundup last year. Bayern lost many lawsuits in the U. S. due to use of Roundup which contain chemical that potentially cause cancer. Roundup has already been approved in the U. S. in 2015, when U. S. Environmental Protection Agency declared glyphosate as safe and not carcinogenic chemical. Since then, glyphosate has faced big skepticism as it is likely to cause cancer. For this reason, European Union has taken closer look at Roundup and finally European Chemicals Agency banned its use in Austria. The product has been banned in France and some other European countries beginning of 2019. According to Sanford C. Bernstein, annual sale of glyphosate herbicide was about $5 billion in 2016.

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The problem Bayer has now is paying for mistake by acquiring Roundup. Bayern wanted to have access to new resources and make more profit by making new products, but instead Roundup made negative impact on company with over 150-year history. Bayer’s stocks fell dramatically after the crisis with thousands of lawsuits alleging Roundup substance causes cancer. However, majority of the shareholders did not agree to action made by Bayer management, so company faced much criticism for its leadership for decision to buy Roundup. The leadership tried to prove that chemical used in weed killer spray does not cause cancer, but finally recognized that bigger effort is needed to win back trust in its business. Bayer plans to invest almost six billion in research over the next decade on development of new ways to combat weeds. The plan is scheduled to cost Bayer more than company was planned to spend previously in whole agriculture but should cut environmental impact by 30% in the next decade. The management realized that health and safety should be their primary concern. One of the Bayer competitors, Corteva Inc., is already developing new formulas for safe weed killer spray and Bayer’s future is in question. Legal battle may take years to resolve and outcome for the company is not known. The cost for Buyer may reach up to 30 billion according to company’s forecast.

The mistake Bayer made by acquiring Roundup would not happen if management and leadership paid closer attention to shareholders opinion and did better analysis of market research. Glyphosate has already been banned in the United States before they decided to buy Roundup and that was the warning sign for the company. Management should strive to do operations that are profitable and in the best interest for its shareholders. Bayer’s management responsibility is to adequately manage the resources needed for production and specify the plan that use these resources to support its business strategy. Consumers are concerned about the fact that glyphosate substance from Roundup can be found in their favorite granola bars, ice creams, and orange juice. Although U. S. Environmental Protection Agency say that the low level of glyphosate found in these foods is not a problem, consumers are still concern how may affect them and the environment in the long run. In today’s environment, consumers are very sensitive about risk. Buyer should re-consider its operations strategy and use its resources to find a safe product for its consumers. Bayer needs to do better market analysis in order to re-build customer driven firm. A customer-driven operations strategy requires a cross-functional effort in every area of Buyer’s company to better understand the needs of its external customers. An order-winner that Roundup company had before finding of glyphosate substance to cause cancer in humans is no longer order-winner, and Buyer started to lose its competitive priority that company had before acquisition. One of the reasons for the issue Buyer faces is that business in general face more ethical quandaries than ever before is an increase in global presence. Large companies have an increasing expectation for creating environmentally conscious practices. Issue of the environment is a part of every manager’s job that goes along with other traditional challenges they face, such as quality, cost, and profit.

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